ashmore defies emd rout

Ashmore Group defied the general gloom over emerging market debt to record inflows of $13.4bn (£8.53bn) in the year to 30 June, up from $1.3bn (£828m) for the previous 12 months.

ashmore defies emd rout


AUM grew to $77.4bn (£49.3bn) at the year end, an increase of 22% over the period.

This comes at a time when the group’s main area of specialism – emerging market debt – has seen significant outflows. Chairman Michael Benson acknowledged the last quarter had been difficult with a “sharp and largely indiscriminate sell-off in risk assets across most of the emerging markets, largely caused by concerns over the timing of the withdrawal of quantitative easing by the US Federal Reserve”.

The group holds around $55bn, representing around three-quarters of its overall AUM, in emerging market debt strategies. Global emerging markets bond funds, both hard currency and those investing in local currencies, have had a difficult year. 

Morningstar figures show the emerging market bond sector has lost €1.7bn since the start of the year, including €1.07bn in July, though the sector is still in positive territory over the past twelve months. However, Ashmore’s largely institutional client base appears to have protected it from the worst of the redemptions – 89% of its business is institutional in nature.

Mark Coombs, chief executive officer at the group, said investment performance contributed $300m to overall assets under management, with strong performance for much of the year dented by the weak fourth quarter. Local currency assets were hit particularly hard. The group’s investment performance remains strong, with 92% of assets under management in funds outperforming their benchmark over three years (30 June 2012: 86%) and 96% over one year (30 June 2012: 23%).

Equities remain the weaker spot: Only 39% of assets under management are in funds outperforming their benchmarks over three years, but one year performance is better at 87%.

Coombs said the case for emerging markets remains strong: "The factors behind (our) positive long-term view should not be confused with the noise that arises from the inevitable, but shorter-lived, volatility associated with the business cycle. In recent months, the cyclical slowdown in certain Emerging Markets has been extrapolated by the market into something abysmal; and at the same time, expectations of a sustained and inflation-less US economic recovery have increased, influenced by the Federal Reserve’s signal in May of imminent QE tapering. Our expectation is that both of these projections will be wrong.

"Developed markets remain structurally challenged. Their immense indebtedness will dampen economic recovery and will have to be addressed in due course through inflation and currency devaluation, with the US furthest down this path, albeit still with total public and private sector debt in excess of 400% of GDP. In contrast, the ability of Emerging Markets to withstand cyclical and external stresses has improved dramatically over the past two decades."



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